TECHNOLOGY SPECTATOR: Telcos battle for an NBN slice

With the political debate stuck in a rut the real action is in the local telco scene with Telstra, Optus and Vodafone gearing up for competition a post-NBN world.

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While the political debate around the NBN is stuck in a rut the real action is clearly evident in the local telco scene. The week has been dominated by the machinations of Telstra, Optus and Vodafone. While Telstra boss David Thodey has been busy telling investors how the telco is in the box seat to make the most of the NBN rollout, its rivals Optus and Vodafone are doing their best to make sure to bolster their positions.

The words and actions of the three local telcos is a clear indication that the NBN is here to stay no matter what happens in the next election and that’s why consolidation is the name of the game. The other thing that telcos are keeping an eye on is differentiation in the NBN environment because as Layer 2 becomes a statutory monopoly the differentiation should come in the Layer 3 services space, although not everyone is convinced. According to Ovum analyst David Kennedy, differentiation in the Layer 3 space is going to get a lot harder because a lot of that is going to get commoditised.

"The future for telcos in the NBN world is all going to be about differentiation and identifying the markets where they can differentiate,” Kennedy says.

While mobile is one obvious differentiator, Kennedy says the enterprise sector has plenty to offer to telcos.

"There are a lot opportunities emerging in the provision of services to enterprise verticals, it’s already happening is some sectors but there’s still a lot yet to happen in health, education and the delivery of government services.”

On the consumer side of things, the NBN is going to be the terminus of the rapid commoditisation of that market and the real challenge for the local telcos is that the everyday consumers will have a plethora of choices when it comes to services. The competition isn’t just going to be between the telcos because the likes of Google, Apple and Samsung looks set to make big waves in Australia.

According to Kennedy, the Australian market is sticking out like a sore thumb for the OTT players because of the NBN and the fact that the government has essentially initiated a forced migration to fibre. This sort of push to fibre is unprecedented and the NBN could well usher in a period of dramatic structural change in the Australian market.

The bottom line here is that the NBN is about to open an enormous window for domestic telcos to offer a raft of new services, and if you have the sort of scale that Telstra possess then things are looking pretty rosy.

Coalition’s NBN future options

As for what impact politics will have on this scenario, let’s just keep in mind that Labor and the Coalition actually see to eye to eye on a number of points. They are both committed to a national rollout and structurally separating Telstra. The things they do disagree on are the cost of delivery and the technology.

Kennedy reckons that the Coalition’s approach is actually viable but it will be challenging because there aren’t too many instances where a fibre to the node network has worked with one company controlling the fibre and another controlling the copper needed for the last mile.

"They can probably negotiate a deal but they will have to work out the best service level agreement ever written,” he says.

The most likely scenario is that NBN Co will acquire the copper; the question will be, how much will it cost? It certainly won’t cost the astronomical $20 billion to $30 billion valuations bandied around a few years ago but should still be a hefty deal for Telstra. The Coalition will at some point have to choose which option they want to choose but whatever happens in the next federal election Stephen Conroy can at least take credit for the fact that he has been successful in laying down a policy framework that will change the telco industry for a long time to come.

Getting the most out of the NBN

Speaking of Conroy, the communications minister might not have been there in person but was no doubt in spirit as the Member for Kingston, Amanda Rishworth, launched the first South Australian digital hub and digital enterprise programs in Wilunga.

The Australian Government’s Digital Enterprise program, delivered by the City of Onkaparinga, in partnership with the Willunga Business and Tourism Association, the Southern Success Business Enterprise Centre and the Onkaparinga Exporters Club, will provide structured workshops, mentoring and support services to small businesses and not-for-profits in the local area on how to get the most out of the NBN.

Getting the most out of the network is now a key refrain for the government and was also a focus at the recent ACBI’s Apps Development Day, which highlighted the innovation potential of the network. The event held in Sydney welcomed more than 300 delegates, representing the research community, telecommunication companies, services and applications sector, and government.

NSW chief scientist and engineer, Dr Mary O’Kane, said in the opening address that Australia’s record in innovation has not been the best, the NBN will be a great enabler for the development of applications which in turn will "transform Australian’s use of broadband.”

According to ACBI director Colin Griffith, the success of the event shows that there is a real hunger in the developer community for information about "how broadband to the home will open up new opportunities".

"There is keen interest, for instance, in hearing about how home networks, sensors and smart devices can provide solutions in areas of need such as health and social services.”

This benefits equation of the NBN is hard to argue against, although that doesn’t stop the network’s critics from pointing out that the same benefits can be achieved through the Coalition’s broadband model.

The event was sponsored by Google, the Australian Interactive Media Industry Association, WebDirections, Ninefold and Commercialisation Australia.

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